State aid for branch expansion is a capital receipt where it is purpose-specific and not tied to business turnover.

A subsidy granted by the State for opening new branches was treated as a capital receipt because it was given for a specific purpose, not as a regular source of income, not as of right, and not linked to business turnover. On these features, the receipt was held to be capital in nature and therefore excluded from total income.

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Issues: Whether the subsidy received by the assessee from the Government of Madhya Pradesh was a revenue receipt includible in total income, or a capital receipt excludible from assessment.

Analysis: The subsidy was granted under section 45 of the Madhya Pradesh Co-operative Societies Act for a specific purpose, namely the opening of new branches. It was not a regular source of income, was not granted as a matter of right, and depended on the Government's decision on the need for aid and the amount to be granted. It was also not linked to the assessee's volume of business. On these features, the receipt was held to be in the nature of capital rather than revenue.

Conclusion: The subsidy was not a revenue receipt and was rightly excluded from the assessee's total income.

Ratio Decidendi: A subsidy granted as State aid for a specific capital purpose, not as a regular or enforceable source of income and not connected to business turnover, is a capital receipt and not taxable as revenue income.

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